Under The Shadow Of U.S. Sanctions, Hope Afloat For Chabahar Port

Parul Chandra 7 March 2019

They seem like modern day behemoths as they reach for the skies, exuding strength and power as they stand silently at the Chabahar port’s Shaheed Beheshti terminal here. These are harbour cranes and towering vacuuming equipment at a port that’s taken baby steps towards what Iran hopes will eventually become a thriving, bustling hub for transit and transshipment.

Coupled with the upcoming Chabahar Free Trade Zone (FTZ) to which Tehran hopes to draw huge foreign investments, it isn’t difficult to fathom why this port city is being advertised as ‘Chabahar: Golden Gate of Iranian Economy’ by the country’s government.

For a country that’s been battling economic sanctions for decades, the port and FTZ hold a lot of promise, for the future at least. For now, the port is far from busy as a solitary ship sails past in the deep blue waters of the Sea of Oman on whose shores Chabahar is located. Amid the calm, all one can hear is the gusty wind that sweeps across the vast terminal.

Containers stand stacked at the terminal and there’s hardly any activity. An Indian diplomat had warned this correspondent before undertaking the trip to Chabahar: “The port is in the rudimentary stages, it’s still developing. IPGL(Indian Ports Global Ltd) has taken over the operations and wants to make it economically viable.”

Arun Kumar Gupta, Managing Director of IPGL, the public sector undertaking which is involved in operating and equipping the port, told SNI: “Any port struggles for the first four or five years as there is a gestation period. After five years, you’ll see what Chabahar will be.”

The terminal is named after Mohammad Beheshti, an Iranian cleric who played an important role in the Iranian revolution of 1979. Beheshti went on to become the secretary of the powerful Islamic Revolutionary Council and head of the newly founded Islamic Republican Party (IRP). He was killed along with many others in 1981 when a bomb exploded in the IRP headquarters in Iran.

The only oceanic port of Iran, Chabahar, lies on the Makoran coast, some 1,000 km east of Iran’s main port of Bandar Abbas, currently under U.S. sanctions. Chabahar lies barely 70 km to the west of Pakistan’s Gwadar port.

Chabahar port gives Iran access to the Indian Ocean and is much closer to Indian ports like Kandla and Mundra than Bandar Abbas. “The port is a “gateway to Afghanistan, Central Asia and beyond for India” is what an Iranian official told SNI. The town located in Iran’s Sistan-Baluchistan province has a population of 200,000 with a Baluch majority who spontaneously switch to Hindi/Urdu upon encountering Indians.

Chabahar has so far escaped U.S. sanctions for allowing shipment of humanitarian assistance to Afghanistan. And it’s clear that both Tehran and New Delhi are giving the project a mighty push to make it a transit hub and to make it financially viable even though sanctions have made things tough for both sides.

For now, India is involved in the development of only Phase I which is about to be completed. With huge strategic stakes in Chabahar port’s development, India has extended a US $150 million Line of Credit and is providing US $85 million for acquiring equipment.

The Iranian government is pushing hard for both the port and the FTZ to take off. The latter was set up in 1992 and is spread over 1,400 sq km in a city that’s spread across 17,150 sq km.

Behrooz Aqaei, the director-general of the Sistan-Baluchistan ports and maritime department, said: “Our aim is to enhance maritime cooperation among countries of the region. The port has two container and three general cargo berths and ships of any size can enter it.” For, the port has a draft (depth) of 16 metres and can accommodate large ships.

Aqaei further said, “We welcome all investors and countries to come and invest.” Aqaei, however, side-stepped questions on what impact U.S. sanctions would have on those wanting to conduct business via Chabahar.

Iranian government officials listed some of the incentives for investing in Chabahar to SNI: “The FTZ is open to joint investments and joint ventures. The land is almost free and so is power. All economic activities in the FTZ are exempt from taxes for 20 years. Products can be manufactured here and exported to third countries. So why not invest here?”

While India has been quick in ensuring the Shaheed Beheshti terminal becomes operational, the investments Tehran has been seeking from Indian business in the FTZ have not been forthcoming. It’s led to a feeling here that New Delhi is lacking an economic vision when it comes to Chabahar.

The sanctions continue to be the dampener, say Indian officials. With the sanctions waiver of November 7, 2018 meant only for providing economic and reconstruction assistance to Afghanistan, New Delhi and Tehran have worked together to circumvent them.

Despite the sanctions, the strategic salience of Chabahar is growing. The port reached yet another milestone recently when it received the first transshipment of goods comprising carpets, dry fruits etc from Afghanistan that was India-bound. This spells a huge opportunity for Afghanistan to double its exports from the current US $1 billion, said Afghan President Ashraf Ghani, while flagging off the goods.

The Shaheed Behesti terminal was inaugurated on December 3, 2017 by Iranian President Hassan Rouhani, with IPGL taking over its operations. But two months before the formal inauguration of the port, India and Iran had already crossed yet another strategic milestone when the former used the new trade route to send its first shipment of wheat for Afghanistan, bypassing Pakistan.

So far, India has sent India has 1,10,000 tonnes of wheat, pulses and other assistance via Chabahar to Afghanistan. From Chabahar, the cargo is transported by road to Zahedan, close to the Iran-Afghanistan border. It then crosses over to Milak in Afghanistan and then onto the Zaranj-Delaram highway built by India.

Notably, on sending the first trial shipment, India described it as a “landmark moment” and said it would “open up new opportunities for trade and transit from and to Afghanistan and enhance trade and commerce between the three countries and the wider region”.